S&P Says Buy Nokia

Nokia (NOK ): Reiterates 5 STARS (buy)

Analyst: Ari Bensinger

S&P doesn't expect the planned combination of wireless service providers AT&T Wireless and Cingular (subject to approvals) to have a significant impact on equipment vendor Nokia, since it supplies handsets to both companies. S&P thinks wireless-infrastructure maker Ericsson is susceptible to likely lower network spending from a combined entity that will strive for meaningful savings. S&P also expects that less wireless operator competition will likely lower the incentive for large handset subsidies, and adversely impact long-term wireless subscriber growth.

Wachovia (WB ): Maintains 5 STARS (buy)

Analyst: Evan Momios

S&P is encouraged by Wachovia's plan to expand in Texas by opening 30 to 50 new branches per year over the next five years. Based on Wachovia's existing network of over 2,500 branches, the expansion should have a minimum near-term impact. However, Texas is projected to grow faster than the rest of the Wachovia franchise, and ongoing M&A activity in the state should help Wachovia to gain market share. S&P is keeping the 2004 earnings per share estimate at $3.71 and setting an 2005 estimate of $4.15. S&P is raising the 12-month target price by $3, to $58, or to about 14 times S&P's 2005 earnings per share estimate, in line with high-growth peers.

Biogen IDEC (BIIB ): Maintains 4 STARS (accumulate)

Analyst: Frank DiLorenzo

Biogen IDEC and its partner, Irish drugmaker Elan, announced they expect to file for FDA approval of the multiple-sclerosis drug Antegren by mid-2004. Biogen IDEC won't release data from a one-year interim analysis, but S&P believes the data has been positive, based on the company's talks with the FDA on allowing a early filing -- a year ahead of schedule. S&P had expected approval in 2006, but now assumes Antegren approval by second-quarter 2005. S&P still sees 2004 earnings per share of $1.47, but is raising 2005's estimate to $1.82, from $1.74. Based on a revised net present-value analysis of the drug developer's products, pipeline, and assets, S&P is raising the 12-month target price to $62, from $54.

Abercrombie & Fitch (ANF ): Maintains 4 STARS (accumulate)

Analyst: Marie Driscoll, CFA

Abercrombie modestly beat S&P's fourth-quarter earnings per share estimate of 95 cents, reporting 96 cents vs. 93 cents. Management outlined a plan to strengthen aspirational positioning across brands, which includes design, merchandising, and marketing. A number of new hires and organizational shifts were cited. At Abercrombie's adult unit, management indicated it will introduce premium priced products. Also, a fourth concept to an older demographic is slated for August with four test stores. Management is known for its cautious outlook, and voiced optimism about the current business, primarily mens. S&P's $35 target, up from $30, represents a price-earnings of 15, based on S&P's fiscal 2005 (Jan.) earnings per share estimate of $2.30.

GameStop (GME ): Maintains 4 STARS (accumulate)

Analyst: Amrit Tewary

GameStop reported a January-quarter comp-store sales increase of 3.9%, about in line with S&P's expectations. Total sales rose 20% from a year ago, aided by strong video game software sales. The software maker expects to report January-quarter earnings per share of 67 cents, above its prior guidance but in line with S&P's estimate. Looking ahead to fiscal 2005 (Jan.), S&P expects sales growth to be boosted by potential video game console price cuts instituted by game console manufacturers. S&P's 12-month target price of $21 is based on S&P's historical p-e model, and applies a target p-e of 16 to S&P's fiscal 2005 earnings per share estimate of $1.30.

Broadcom (BRCM ): Reiterates 3 STARS (hold)

Analyst: Thomas Smith, CFA

Broadcom announced a conference call for after the close of trading Wednesday "to discuss its stronger business outlook." S&P thinks it's likely that, paralleling other chipmakers' recent updates, Broadcom will describe rising semiconductor demand and is apt to raise its March-quarter revenue guidance above its present guidance for 10% quarter-over-quarter sales growth. It topped 10% quarter-over-quarter growth in each of the past four quarters. Broadcom's strategy involves acquisitions, so S&P believes news is possible on that front too. S&P's discounted cash-flow analysis shows less price potential than S&P's forward p-e analysis, and S&P's 12-month target price is $40.

Metro-Goldwyn-Mayer (MGM ): Maintains 3 STARS (hold)

Analyst: Tuna Amobi, CPA, CFA

MGM posted fourth-quarter earnings per share of 25 cents, vs. 5 cents, which was 9 cents above S&P's estimate. Revenues dipped 1%, but EBITDA jumped 57%, with all three segments outperforming, led by feature films. "Barbershop 2" debuted strongly, and "Stargate Atlantis" will have a June TV premiere on the Sci Fi channel. In S&P's view, MGM has enhanced its flexibility with an almost debt-free balance sheet after a recent $1.15 billion term loan payoff. But S&P remains cautious on the shares, based on film volatility and a lower float after a recent tender offer.

Medco Health (MHS ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Phillip Seligman

S&P think Medco's loss of the pharmacy-benefit management mail service program for the Federal Employees Program lowered its retention rate from its below-peer 93%. Medco now sees 2004 GAAP earnings per share of $1.64 to $1.75, vs. $1.75 to $1.86 earlier, but kept its cash earnings per share estimate of $2.03 to $2.14, based on the increased amortization expense on intangible assets resulting from the account loss. S&P is cutting the forward p-e to below 16, from 19.5, but is keeping the 2004 cash earnings per share estimate of $2.14. S&P also reduced the 12-month target price by $8, to $34. S&P wouldn't add to positions at current levels.

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